Fixing the Telecom train wreck

I didn’t know this, but it explains a lot:

“When Theresa Gattung was named as new chief executive at Telecom in October 1999, the shares closed at $8.61.

Yesterday, after news that British Telecom executive Paul Reynolds will replace Gattung, the shares closed at $4.48”

It’s not like this is a hard job. The share price reflects the sum of the present value of future streams of income from Telecom. By under-investing in those future cash flow streams at the expense of short term return Telecom has almost halved it’s value. Telecom compuned the error by dubious investments in Australia and Ferrit, and I would assume that Gen-i was purchased for far to much.

What would I do? get rid of any non core businesses, invest in infrasucture to provide leading edge services, open up the exchanges and compete vigourously on service, quality and price. I’d also drop most of the marketing spend and get rid of the branding that treats customers like idiots. Aong the way a lot of senior managers playing politics with a small p would be out the door.

There is plenty of money to be made in Telecom. It could almost be a buy. almost.

Published by Lance Wiggs


One reply on “Fixing the Telecom train wreck”

  1. Telecom’s successful moves are… two I think: the investment in the Southern Cross Cable and cutting costs by outsourcing network management to Alcatel. However, Telecom passed on a chance to buy the half of SCC that it doesn’t own for some reason, and now Alcatel has them by the short and curlies because it runs both the fixed and mobile networks.

    Apart from Ferrit and Australia, the 027 CDMA network is looking like a dubious investment now. What happened to all the plans to become a player in the content market, through IPTV and VoD? Who remembers Telecom’s Video Shed in the Viaduct? Nothing came out of that.

    Telecom’s focused on defending existing revenue streams, a strategy that’s worked because it has no competition. I think the idea is now to move on from that to own the national infrastructure for others to rent out. Trouble is, that infrastructure is dated – where’s the promised NGN? – so it’s not exactly a great deal for anyone.


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